M Line Holdings Inc (MLHC)

[stervc]

MLHC & SQCC**Parallel Valuation to Consider…

Parallel Valuation is when a certain valuation is generated in a company’s shares through the issuing of a spin-off or dividend of shares in another existing stock that is at a certain price of trading or that will eventually trade at a certain price or value.

Parallel Valuation will exist regardless to what the share structure is here with MLHC because of the dividend coming in SQCC. This dividend has eliminated the Outstanding Shares (OS) for being the key fundamental variable as the denominator that’s used to ”primarily” assess a valuation for MLHC.

The dividend to MLHC shareholders of SQCC shares are expected to be free trading shares and is three-sided as a minimum for consideration of gains to its shareholders:

1st - Gains exist from the increase of valuation in the Parent Stock (MLHC) which should cause an increase in price as valuation is realized.
2nd - Gains exist from the increase of valuation in the Subsidiary Stock (SQCC) which should cause an increase in price as valuation is realized.
3rd - Gains exist from the existing “direct correlation” of value from the share dissemination between the Parent Stock (MLHC) and the Subsidiary Stock (SQCC) as either increases in price or valuation.

Within this post, I an going to focus on the 3rd side of consideration for gains. I will also consider that the thoughts below are presumptions that the information will transform into a reality based on the information released by the company. Also, use the Substitution Property going forward as any variable changes along the way. This post and information is not the gospel and should only be used as a framework to get an idea of what’s transpiring with this dividend and its worth to MLHC shareholders.

Parallel Valuation are some thoughts I have shared in a few posts with other stocks over the years. I have seen some companies do it while I have seen some fall short of such. A good recent example to ”compare and contrast” would be the situation with UNGS and GCAN. Not long ago, UNGS released news that for every 750 shares you bought in UNGS you would get 1 share in GCAN which had hit a high of trading at .735 per share. The transaction actually happened, and I had made more from being a GCAN shareholder from my dividend from buying UNGS than I did with owning UNGS.

Even though SQCC will trade as a subsidiary under MLHC, both will cause a ”direct correlation” in valuation even past the date of record for the dividend. This is like a ”double whammy” of valuation for us MLHC shareholders. Or actually a ”triple whammy” because by becoming an MLHC shareholder, you get SQCC as added valuation to your portfolio. This is because SQCC financials will be totally included into the MLHC financials as part of their Consolidated Financial Statements:
https://ih.advfn.com/stock-market/USOTC/m-line-holdings-inc-pl-MLHC/stock-news/79482677/m-line-holdings-inc-acquires-control-of-square-c

Now let’s assess a Fundamental Valuation for SQCC to get an idea of what we are going to be getting in value from this dividend. The recently released PR stated that SQCC is going to have placed into it from MLHC… the Caravel Group, Inc. along with their primary products of Vea™ proactive hydration and caffeinated sparkling water beverages and the Torque® line of energy drinks as well as Larry Caputo wine. Also, MLHC stated with the PR that the SQCC forecasted revenues from their acquisitions are expected to be over $20 million dollars in the next twelve months with anticipated Net Profits to exceed 35%. To support why I believe in these companies coming into SQCC, read the post below:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=146070081

SQCC, per OTC Markets, has Outstanding Shares (OS) of 189,948,159 shares:
https://www.otcmarkets.com/stock/SQCC/security

Per the addition of the 50,000,000 shares of SQCC to be issued as a dividend to MLHC shareholders, the new OS is going to be 239,948,159 shares. So, I’m going to round up to roughly 240 million shares for the OS.

Within the Beverage Industry, the P/E Ratio is 60.01 as can be confirmed from below:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.html

Now, and very important, we must derive a valuation for where SQCC should fundamentally trade considering $20 Million in revenues with a 35% Net Profit Margin:

$20,000,000 Revenues x .35 Net Profit Margin = $7,000,000 Net Income

Net Income ÷ Outstanding Shares (OS) = Earnings Per Share

$7,000,000 Net Income ÷ 239,948,159 shares (SQCC OS) = .029 EPS

.029 EPS x 60.01 Beverage Industry PE Ratio = $1.74 per share

This means that SQCC right now as of today, should not be trading at .05 per share range which is where it’s at now. Based on the forecasted revenues, it should be trading in the $1.70+ per share range.

Now let’s bring in some discussion on Parallel Valuation to determine what a fair value is for MLHC and SQCC in direct correlation to one another.

For every 150 shares of the Parent Stock (MLHC) that you buy, you will get 1 share of the Subsidiary Stock (SQCC) placed into your brokerage account. This distribution ratio means that if you buy 10,000,000 shares of MLHC at .0004 per share, you will pay $4,000 for your total position in MLHC. In return, given from the example flow within this post, you would get the following shares “for free” in SQCC that is worth $1.70+ per share as indicated below:

** 10,000,000 ÷ 150 = approximately 66,000 Shares roughly in SQCC valued at $1.70+ per share
** 66,000 SQCC Shares x $1.70+ per share = $115,500

The above scenario would mean that if you spent $4,000 for your 10 million shares investment into MLHC, you would be granted in return some dividend shares in SQCC valued at $115,500 in value. Plus, you keep your 10 million shares of MLHC that would probably appreciate to be worth much more than the $4,000 you paid for your initial investment. So...

$115,5000 ÷ $4,000 = 28.875 times greater in additional value

This means that with considering the rationale from above, you would be getting an ”additional” value of shares from the dividend of shares of SQCC that would be equal to 28.875 times greater than the original purchase of your principle value of MLHC shares. This would mean that the Equilibrium Price for breaking even in knowing where the value of MLHC would be equal to the given value from its SQCC dividend considering more is confirmed to justify these ”thoughts above” would be:

.0004 x 28.875 = .0115 Per Share for MLHC Equilibrium Price

The above calculation to derive that MLHC equilibrium share value of at least .0115 per share is only one of the three-sided ways for obtaining valuation that will be granted towards its shareholders in MLHC if the price of either stock goes up in the same proportion.

Another side of considering valuation comes from SQCC being a majority owned subsidiary of MLHC of which will have its financials to be totally included into the MLHC financials as part of their Consolidated Financial Statements. This means that MLHC will capture the $7,00,000 Net Income derived from the Revenues generated by SQCC. This gives MLHC an additional value to be add of .054 per share as derived from below even after taking into its OS of 7,385,473,434 shares per OTC Markets:
https://www.otcmarkets.com/stock/MLHC/security

Net Income ÷ Outstanding Shares (OS) = Earnings Per Share

$7,000,000 Net Income ÷ 7,385,473,434 shares (MLHC OS) = .0009 EPS

.0009 EPS x 60.01 Beverage Industry PE Ratio = .054 per share

This means that MLHC has two valuations that are additional to one another to consider… the .0115 Per Share for MLHC Equilibrium Price from the dividend and the .054 per share for the MLHC Fundamental Valuation derived from the Revenues/Net Income generated from SQCC being its subsidiary. Regardless to how anyone chooses to look at things here with MLHC, at these levels, MLHC is significantly undervalued.

v/r
Sterling